Trafigura-backed Congolese miner seeks buyer due to debt problems

The company’s ambitious expansion campaign ran into financial difficulties following the collapse in cobalt prices.

A mining company in the Democratic Republic of Congo backed by commodities trader Trafigura Group is up for sale following a collapse in cobalt prices on completion of key projects.

According to Bloomberg, one of our confrères, the attempted sale of Chemaf Resources Ltd. comes after the company’s ambitious expansion project ran into financial difficulties. This situation has prompted the company to seek new investments.
The company’s ambitious expansion campaign ran into financial difficulties following the collapse in cobalt prices. The company is attempting to build one of the world’s largest copper and cobalt deposits.
one of Congo’s largest copper and cobalt mines, as well as two new processing plants. In 2022, it secured a $600 million loan from Trafigura.

Bloomberg had reported in August that the trading giant was seeking new financing for the development after exceeding its budget.

According to a document consulted by Bloomberg, interested buyers are now invited to bid for the whole of Chemaf, a company registered on the Isle of Man, as part of a sales procedure launched at the beginning of September.

The tender, signed by Chemaf founder and chairman Shiraz Virji, asked potential owners to submit non-binding bids by October 17, and required bidders to also commit to the $250-300 million still needed to complete construction of Chemaf’s projects.

The deadline has since been extended to allow more time, according to a person familiar with the matter. Chemaf is also open to transactions other than the total sale of the company – including a joint venture – as its priority is capital injection.
It is targeting a valuation of around $1 billion, said the person, who asked not to be identified to discuss private information.

The document also states that Chemaf’s main subsidiary in the DRC is the subject of a “preventive settlement agreement” approved by a local court in August, which gives the company the opportunity to restructure its debts while prohibiting creditors from taking legal action against it.
Chemaf intends to conclude this process as part of a possible acquisition, the document states. A Chemaf spokesman declined to comment.

The details of the court-approved arrangement and the subsequent sale process give the clearest picture of the difficulties faced by Chemaf, a long-standing partner of Trafigura, and the extent to which the trading company’s gamble turned out to be wrong. These setbacks have increased the pressure on Trafigura’s metals unit, which was already in the spotlight after falling victim to a massive alleged nickel fraud, and has been increasingly overshadowed by more complex business, including the company’s more profitable energy business.

This saga also highlights a glaring incongruity in the world of metals: prices for battery metals such as cobalt and nickel, which will be essential to the global energy transition, have fallen sharply, even as governments and manufacturers scramble to secure future supplies of essential minerals.


Source : Bloomberg
By William Clowes and Michael J. Kavanagh
Oct 2023

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